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The flu jab blunder which contributed to the largest spike in deaths in a generation may have brought unexpected benefits for Britain’s pension black hole, a new report suggests.

Latest projections from the The Institute and Faculty of Actuaries (IFoA) show that the increase in the mortality rate in 2016 has slightly reduced overall life expectancy for the over 65s, down 1.3 per cent for men, and 2 per cent for women.

According to Mercer, the world’s largest human resources consulting firm, the shift has removed around £28 billion of pension scheme liabilities from the balance sheets of FTSE350 companies.

Last year figures from the Office for National Statistics (ONS) found there were 16,415 excess deaths in the 2015/2016 winter, the largest percentage increase since 1968, with flu blamed for the large increase.

The extra deaths were fuelled by the flu jab being mismatched for the main strain of influenza, which unexpectedly mutated, meaning it worked for just one in three adults, compared to the 50 per cent it usually protects.

In the summer of 2015 the influenza virus mutated unexpectedly meaning the flu jab was not as effective as usualCredit:
Alamy

The number of deaths in England and Wales was so high that it lowered life expectancy for girls born this year by two months to 79.3, and boys by three months to 82.9, the first fall in two decades.

This winter flu season also started earlier than usual, which meant 2016 was bookended by a surge of excess deaths, which has led to IFoA reviewing its Continuous Mortality Investigation model, which is used by most pension providers to estimate member's life expectancy and adjust benefit schemes.

“There’s some debate about exactly why this has happened,” said Glyn Bradley, Principal in Mercer’s Innovation, Policy and Research team.

“Some point to the strain in the UK’s health and care system, caught between an ageing population and budget cuts. On the other hand, this winter’s excess mortality in the UK isn’t noticeably worse than for our European neighbours.

“What does seem to be occurring across the northern hemisphere is that winter flu has started comparatively early, starting in December in the UK. This means the calendar year 2016 could catch significant parts of two winter flu outbreaks, rather just one.

“Hospital admissions, for example, appear to have peaked in mid-January, whereas in 2016 they didn’t peak until March.”

Elderly people were largely impacted by the jab problemCredit:
John Stillwell

“In broad terms, mortality is roughly where it was in 2011,” explained Bradley. “Quite reasonably, given the dataset, the CMI’s 2016 model produces lower rates of mortality improvements than previously, particularly over the next decade.

“However, that’s quite short-term when it comes to pensions planning. The long-term drivers of future improvements in life expectancy remain.

“Medical research, application of past breakthroughs, innovative use of technology and potential for lifestyle improvements all mean that lifespans will continue to increase.”

At the beginning of the year the pension liabilities for FTSE 350 employers were £857 billion so, the adjustment could remove around £28 billion of pension scheme liabilities from company balance sheets.

Andrew Ward, Partner, and UK Head of Risk Transfer at Mercer, added: “From a pension scheme perspective, this new data is still only a snapshot.

“It’s possible that population experience isn’t completely representative of average pension scheme membership, and some significant risks remain in a world where an extra year of life expectancy can add 5 per cent to liabilities.

“Longevity is a major risk that few schemes have addressed in any way. Managing this now won’t be the right approach for everyone.”